Last week, the annual "festival of hype" kicked off.
Also known as the Consumer Electronics Show (CES), it's the Super
Bowl of tech gadgets. It's held every January in Las Vegas. This is
fitting since it's a big, flashy showcase of poor decisions.
At this year's CES, tablet computers were all the rage. Lenovo,
Asus, Acer, Sharp, and Motorola are among those that unveiled tablets.
It's no exaggeration to say almost every manufacturer that can make a
tablet computer will release one during 2011.
It's a lot of hype. The market will become flooded. Retailers will order too many... and end up on the losing end of the hype.
The winners will be the chip makers. Semiconductor
companies make all the little parts that go into gadgets like cell
phones and tablet computers. Many of these companies were the same ones
making parts for 3D TVs last year. That was a huge flop. But the parts
makers came out just fine.
That's the beauty of being a parts-maker. It doesn't matter if the
products are overhyped. They get tons of orders from multiple
manufacturers. They don't have to worry about which models end up
catching on. And next year, they'll be making the processors or other
parts to go into the next overhyped product.
You've probably seen lots of headlines coming from reporters who
were at the CES. Message boards filled up with tech geeks' opinions on
which products are going to be the big winners. (Feel free to laugh if
anyone calls one of them an "iPad killer.")
For bigger gains, you can buy the companies that show up in lots of
the tablets that came out at the CES. For example, Nvidia (NVDA) has a
new processor called "Tegra 2" that's going into tablets from Motorola
Nvidia has spent the last decade as the industry leader in
graphics-related parts like video cards. This is important heading into
the latest cycle of products. Manufacturers are desperate to upgrade the
graphics capabilities of their tablets and smartphones.
After lagging during 2010, I wouldn't be surprised to see shares of
Nvidia outperform over the next six months. And shares just made a huge
Regardless whether the tablet boom continues... or turns into another
3D-TV-like debacle, the big manufacturers are going to keep ordering
parts for their gadgets.